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Exxon 'seeking to damage' Venezuela

Chavez hits back after court order freezes $12bn of the country's energy assets.

10 Feb 2008 14:52 GMT

State oil company PDVSA is Hugo Chavez's main source of income [AFP]

Exxon Mobil, which last week reported the largest ever profit of a US company, sought the freeze to guarantee repayment from Venezuela should it win arbitration over the compensation.

The court ruling means that PDVSA, the state oil company, cannot sell certain assets or move some funds while the compensation case is reviewed.

PDVSA is the main source of income for Chavez's government.

Energy battle

Following the court order, the nation's debt values plunged because of investor worries it could limit the activities of the PDVSA and affect its cash flow.

The Venezuelan company, which has more than $90 billion in assets, finances Chavez's spending on food subsidies, schools and clinics for the country's sizeable poor population.

PDVSA has suffered repeated refinery outages, struggled to improve production and shown signs of cash flow problems in the last year.

Venezuela says the court rulings are temporary and will have no impact on PDVSA's supplies, operations or finances.

It plans to file a response this week to have the rulings reversed.

As energy prices increase, Exxon's challenge is the boldest move so far by an oil company against governments such as Russia and Ecuador that have moved to increase their control over natural resources.

Chavez accuses big oil companies and large consumer nations of seeking to coerce major producers such as Venezuela into hiking supply to help lower world prices.